There are thousands of chain stores all across North America, Europe, and the world. Each town that you drive through will have the same hardware store selling the same tools and the same restaurants selling the same hamburgers as the last town you drive through. This is called franchising. How does this happen? Who is running these stores? How can you turn it into a business opportunity for yourself? This article will explain the basics of franchising and how you can make it work for you.
Franchising is the act of duplicating a successful business model and allowing another person to use it... for a prescribed fee. For example, there was originally only one McDonalds' restaurant. When it became a success, its owner began to license other prospective business owners to buy into a program and open new McDonalds' stores in other cities using his model. These stores also became successful, which benefited both the new owner and the original owner who sold them the franchise.
This method is a way of getting around the risk and outlay required for a business owner to expand his or her store into a chain. In a chain, all of the satellite stores are under the control of the head office, which gives them less autonomy and more ability to drag down the whole business model if the art isn't selling in a particular place. Because franchise owners actually own their store, they're also more motivated to succeed than a manager who is simply looking after a single branch of a chain store and passing all the profits up the line to headquarters.
Not all business models are able to succeed as franchises, so if you're thinking of branching out, ask yourself if your model has a good profitability record, is easy to replicate, has a unique concept, has detailed procedures, is easy to operate, is broadly appealing, and inexpensive to operate. These are the keys to success.
If you would like to open a franchise, startup costs vary. You can open a convenience store chain for about $40,000 but for a hotel chain you will need upwards of 3 million. Once you're up and running, you will owe royalties to the franchise head office. Some Canadian franchises you would recognize include Subway, 7-Eleven, Housemaster, Tim Hortons, and H&R Block.